The Aviva plc (LON: AV) share price has risen 1.28% this year, leaving most investors wondering what comes next for the insurance company. A quick look at Aviva’s share price chart below shows that its shares have bounced off a critical resistance zone that has been in place since August 2022.
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Aviva shares could be headed much higher if they can break above this crucial zone, but there are no guarantees that we will get such a break. So far, the level has been tested thrice since late November 2022 and has held each time, forcing the shares to pull back. However, there is still hope that the shares will break out eventually.
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Meanwhile, we must look at the British multinational insurance company’s fundamentals to see if they support a buy recommendation. Aviva currently pays out a 7% dividend making it extremely popular among income investors. According to its last financial report, the company is also in solid financial shape.
Aviva noted that its general insurance (GI) division grew the value of its underwritten premiums by 10% to £7.2 billion in the first nine months of 2022, while its combined operating ratio, which measures the profitability of its operations rose to 94.3% from the previous figure of 92.4%, representing a substantial number.
The company’s wealth management division also registered a 6% increase in net inflows compared to its assets under management (AUM) at the beginning of the year. The firm also unveiled plans to return capital to investors via a dividend payout and additional payouts.
Most UK insurance firms have struggled to remain profitable given the record-high inflation that has raised the value of insurance claims, which led Aviva’s competitor Direct Line insurance to scrap its dividend payment for the 2022 financial year.
However, all is not rosy for Aviva, which has been known to slash its dividend payout whenever its profits shrink. Income investors who rely on dividend payouts to fund their lifestyles may be burnt in such cases.
*This is not investment advice.
The Aviva share price chart.
The Aviva share price are up 1.28% this year but are up 12.76% in the past six months. What’s next for the insurance company?
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